SEBI Board Meeting Outcome: Overhaul of Mutual Funds to Stock Brokers Regulations

The capital markets regulator, SEBI, announced a series of significant policy decisions at its board meeting held on Wednesday, December 17. The measures aim to simplify regulations for stock brokers, make mutual fund investments more cost-effective, and ease compliance norms for companies planning to go public.

10 Key Takeaways from SEBI’s Board Meeting

Revamped Stock Brokers Framework

SEBI has notified a new set of regulations for stock brokers, replacing the stock brokers Regulations of 1992. The updated framework is streamlined into 11 concise chapters, designed to reduce complexity and improve ease of compliance. Stock exchanges will now function as the first-level regulators for brokers, supported by a revamped reporting mechanism.

Change in Mutual Funds Expense Ratio

The regulator has approved new Mutual Fund Regulations, replacing the 1996 rules. A major reform is the introduction of the Base Expense Ratio (BER), which replaces the traditional expense ratio. Costs such as STT, GST, stamp duty, and exchange charges will be excluded from the BER, improving transparency for investors.

Lower Brokerage Fee Caps

SEBI has reduced the maximum brokerage charges across markets. In the cash segment, the limit has been cut from 8.59 basis points to 6 basis points, while in the derivatives segment, it has been lowered from 3.89 basis points to 2 basis points.

Simplified IPO norms

Amendments to the ICDR regulations will make IPO guidelines more flexible. One key change mandates a six-month lock-in period for shares held by non-promoter individuals prior to the public issue.

Relief for Debt-Listed Companies

SEBI has increased the threshold for classifying a firm as a High Value Debt Listed Entity (HVDLE). The new benchmark is an outstanding debt of ₹5,000 crore, up from the earlier ₹1,000 crore, significantly easing compliance for several companies.

Eased Norms for Debt Market Participants

Amendments to the NCS Regulations, 2021, will simplify rules governing the issuance and listing of non-convertible securities and other debt instruments, providing greater operational flexibility.

Expanded Scope for Credit Rating Agencies

Credit rating agencies are now permitted to rate instruments regulated by authorities such as the RBI. Additionally, the scope of ratings for unlisted debt instruments has been widened. However, rating reports must clearly differentiate between SEBI-regulated products and those overseen by other regulators.

Faster and Simpler Share Transfers

SEBI has streamlined share transfer procedures, eliminating the need for investors to obtain separate confirmation letters from companies. Once verification is complete, shares will be directly credited to the investors' demat accounts.

One-Time Window for Physical Share Transfers

Investors holding shares in physical form will get a one-time opportunity to transfer them into their own name in dematerialised form. This facility will be available for a limited period and will apply only to shares purchased before April 1, 2019.

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Extended Timeline for Claiming Unclaimed Funds

Issuers will be allowed to transfer unclaimed deposits and dividends to the Investor Education and Protection Fund (IEPF) through a one-time window, exercisable seven years after maturity. This move gives investors additional time to claim their dues.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

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